Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
An accelerated death benefit is a rider on life insurance policies (premium free on just about every policy in the market). In short, the rider states that if you became terminally ill, you can get access to a percentage of the life insurance proceeds prior to death to help pay for certain things such as medical bills.
The percentage of the face amount allowed and the number of months the carrier will allow for the diagnosis of being terminally ill will vary by company - generally up to 25% of the face amount and either 6 or 12 months of remaining life expectancy.
Great Question! It is a rider on your whole life policy that for a fee, will allow you to take a portion of your death benefit early. It is something that I advise my clients to consider carefully before doing, as there are fees, interest charged on the amount forwarded, and possibly large tax consequences. What you might anticipate receiving may actually be much larger than the sum that you do.If you would like more information, please feel free to contact me. Thanks for asking!
The accelerated benefit is a premium free rider on practically all term and permanent plans. This rider allows policyholders with a terminal illness, usually 12 to 24 months of life expectancy to receive a percentage of the face amount of their policy usually 50% or higher to deal with end of life expenses. This is very common in the US since the 1980s Aids epidemic. During this period Viatical Life Settlement companies were out of control buying Aids patients policies for pennies on the dollar so the patients could use the money for medicine and experimental procedures still excluded under most health insurance plans. To slow this practice down life insurance companies started adding the accelerated death benefit to accomplish the same thing at a better rate than the Viatical companies were paying. It is now very common on all plans.
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The percentage of the face amount allowed and the number of months the carrier will allow for the diagnosis of being terminally ill will vary by company - generally up to 25% of the face amount and either 6 or 12 months of remaining life expectancy.